DARMA™ (Deferred Annuity Risk Management Assistant), is a new online app from InjAnnuity Inc., for evaluating, actively managing and monitoring Variable, Indexed & Fixed Deferred Annuity contracts. As such it is an indispensable tool for when the markets get jittery during times of National concern, such as the Covid-19 Pandemic. Use it's evaluations to address any anxiety your client's might have, so that they don't make bad and costly decisions about their annuity investment.
Background
Deferred Annuities can be quite complicated and opaque. Significantly, till now, Financial Advisors have had no effective tool to estimate a contract’s future performance or manage and monitor it for evaluation and decision-making on an on-going basis.
However, if you are not a Financial Advisor or do not have some in-depth prior experience with Deferred Annuities, then we strongly advise you to thoroughly check out the information that we have posted here before you proceed any further with this website.
For the first time ever, this app provides Financial Advisors with a standardized method and metric for this evaluation so they can better advise their clients. However, policyholders, who don't mind investing some time, can also use the software to do same.
How was this accomplished?
Overview
Variable Deferred Annuities (VDA)
Variable Deferred Annuities are different from other DA products, in that, the policyholder assumes the risk for their Variable (generally Mutual Funds) investments in the contract. To offset this risk, many products offer a guardrail in the form of riders for various Guaranteed Income Benefits (GIBs), in the event that the market goes south, and their underlying sub-account assets follow suit.
These GIB riders can fall into several categories with various titles such as: Guaranteed Minimum Income Benefits (GMIBs), Guaranteed Minimum Accumulation Benefits (GMABs), Guaranteed Minimum Withdrawal Benefits (GMWBs), Guaranteed Lifetime Withdrawal Benefits (GLWBs), to name the most popular ones.
They represent the Insurance aspect of the contract and are all designed to provide a minimum income guarantee to the policyholder to hedge against downturns in the Market.
GIB benefits are either a future payout annuity or stream of withdrawals; often, with Guaranteed Withdrawal Benefit Riders (GWBs), the Accumulation Fund will persist until it is depleted by these withdrawals. However, in many cases, after the Accumulation Fund depletes the payments will continue until death of the annuitant or joint annuitants (GLWB – Guaranteed Lifetime Withdrawal Benefit).
For the main Accumulation Fund, Fees and Charges are deducted and Interest is credited, based on the performance of the underlying sub-accounts.
Therefore, projecting a Variable contract entails a lot of uncertainty, meaning that the app needs to estimate future projections of the Accumulation Fund, any parallel Shadow Funds and any related Benefits, such as future Cash Surrender Values, Income Streams and Death Benefits that depend on them.
Fixed Indexed Deferred Annuities (IDA)
With Indexed Annuities, the Policyholder is indirectly invested in the market and is not at risk like they would be with Variable Annuities. However, like, Variable, the performance of their Indexed Funds is dependent the the markets' performances.
Fixed Deferred Annuities (FDA)
In general, Fixed Deferred Annuities are dependent on the performance and efficiency of the Insurance company. However, their investments are very conservative, so DARMA™ projects their returns based on the performance of a passel of typical Insurance company investments.
All Deferred Annuities
No matter which kind of annuity you wish to evaluate, its projected cash flows are discounted based on the policyholder' risk-appetite and that in turn will vary from one economic scenario to the next.
Goals
Solution
A new and sound metric to measure the contract’s performance.
This metric is AV-ITM© (“Account Value – In-The-Moneyness”) and it has 2 facets. One , Net AV-ITM©, that compares the current Account Value to future returns net of tax and the other, Gross AV-ITM©, that compares the current Account Value to the future gross returns.
Basically it’s a + or – percentage produced by the app where ‘+’ is ITM and ‘-' is not ITM and its size indicates the magnitude of the ITM. In addition, Other evaluation facets are provided, such as the Present Value of future Cash Flows Net of Taxes and Internal Rates of Return.
IMPORTANT PRINCIPLE
ITM is solely based on future CASH!
The App establishes a theoretical Policyholder Bank Account to process all projected future cash events:
The theoretical Policyholder Bank processes the following Cash Events:
If the event is not a cash event resulting from the above and going thru the theoretical Policyholder Bank, then it it does not contribute to the ITM!
Discounting Future Cash Benefits
AV-ITM© is calculated using the time value of money to determine the present value of future cash financial events. This time value of money uses a discount rate that is based on the risk appetite of the Policyholder.
So, if the Policyholder is an aggressive investor, they will get a different AV-ITM© than a conservative investor.
DARMA™ provides AV-ITM© using projected Stochastic (Randomly generated) Economic Scenarios
Each Scenario has its own AV-ITM©
The App employs a generally accepted approach for generating thousands of future Calibrated Randomly Generated Economic Scenarios, that produce a Frequency Distributions of the continuous random variable AV-ITM©
Project up to 10,001 calibrated random scenarios for each variable asset category and provide the user with the results of a range, representing the lowest performing percentile to the highest (0 thru 100).
The resulting Median Scenario (50th Percentile) is recommended as the app’s standard yardstick for the contract’s performance. The metric can be used both as an indicator of the contract’s value and for comparison with other competing contracts’ AV-ITM© that were also processed using this app.
Each Scenario also Produces all future year-end Cash Surrender Values, Death Benefits, Elective Withdrawals and Income streams in the Users targeted range of years
Using an existing available Standardized Classification for the Sub-Accounts Funds Each Sub-Account would have its own level of risk, based on the type of underlying assets.
The App uses the same classification that Insurance Companies use for their new statutory PBR Valuation requirements.
The app presents an initial questionnaire which allows you to model the contract's main features and Benefits followed by a focused hierarchical outline based on those initial answers.
In the App, Current Economic conditions are updated frequently, by InjAnnuity, and future Economic Scenarios are re-generated using these current market condition as a seed for utilization by the User.
Things Change! - User Diligence
DARMA™ produces many sophisticated analytical reports and audits and provides electable options based on the contract’s rules, to strategize the User’s objectives and optimize the contract’s AV-ITM©.
The strength of the app lies in the simplicity of standardizing the results as an AV-ITM© percentage. However, it also provides an easy to understand "Star" evaluation (1 - 10 Stars), excellent reports and sets of data that can be used by the more sophisticated user to “roll their own”.
This is especially useful if you who wish to compare different products for potential purchase.
To summarize; this is an on-going process and a contract should be periodically monitored in light of many factors, such as economic conditions, changes in the policyholder's health and longevity, changes to the contract initiated by the company, short-term guarantees, change of the policyholder’s risk appetite, death of spouse, to name a few.
All of these can significantly change the AV-ITM© evaluation and, if necessary, will require action by the policyholder to re-optimize it.
BE PREPARED TO INVEST SOME TIME IN THIS APP
This will be a challenging but valuable investment of your time.
Effort and patience will be required, but the reward will be a clearer understanding of how your Policy behaves, and what *you* can *do* with it to maximize your returns.
Bad or no decision-making about your contract can result in the loss of significant income, so using this app properly is extremely important for your future retirement.
Bear this in mind as you enter the information, because, unless you have a very simple contract, you will probably have to spend some time and effort to track down all the data that you will need to enter.
In addition to reading and understanding our documentation, you will also have to thoroughly peruse your contract and its related information. You will also need to contact your Insurance Company.
BE PREPARED TO INVEST SEVERAL DAYS OF RESEARCH, ENTERING AND REVISING DATA, CHECKING REPORTS AND AUDITS FROM THIS APP
ALL NECESSARY FOR THE EXTREMELY IMPORTANT GOAL OF UNDERSTANDING AND MONETIZING YOUR DEFERRED ANNUITY INVESTMENT.
DON'T DELAY. GET STARTED TODAY!
Background
Deferred Annuities can be quite complicated and opaque. Significantly, till now, Financial Advisors have had no effective tool to estimate a contract’s future performance or manage and monitor it for evaluation and decision-making on an on-going basis.
However, if you are not a Financial Advisor or do not have some in-depth prior experience with Deferred Annuities, then we strongly advise you to thoroughly check out the information that we have posted here before you proceed any further with this website.
For the first time ever, this app provides Financial Advisors with a standardized method and metric for this evaluation so they can better advise their clients. However, policyholders, who don't mind investing some time, can also use the software to do same.
How was this accomplished?
Overview
Variable Deferred Annuities (VDA)
Variable Deferred Annuities are different from other DA products, in that, the policyholder assumes the risk for their Variable (generally Mutual Funds) investments in the contract. To offset this risk, many products offer a guardrail in the form of riders for various Guaranteed Income Benefits (GIBs), in the event that the market goes south, and their underlying sub-account assets follow suit.
These GIB riders can fall into several categories with various titles such as: Guaranteed Minimum Income Benefits (GMIBs), Guaranteed Minimum Accumulation Benefits (GMABs), Guaranteed Minimum Withdrawal Benefits (GMWBs), Guaranteed Lifetime Withdrawal Benefits (GLWBs), to name the most popular ones.
They represent the Insurance aspect of the contract and are all designed to provide a minimum income guarantee to the policyholder to hedge against downturns in the Market.
GIB benefits are either a future payout annuity or stream of withdrawals; often, with Guaranteed Withdrawal Benefit Riders (GWBs), the Accumulation Fund will persist until it is depleted by these withdrawals. However, in many cases, after the Accumulation Fund depletes the payments will continue until death of the annuitant or joint annuitants (GLWB – Guaranteed Lifetime Withdrawal Benefit).
For the main Accumulation Fund, Fees and Charges are deducted and Interest is credited, based on the performance of the underlying sub-accounts.
Therefore, projecting a Variable contract entails a lot of uncertainty, meaning that the app needs to estimate future projections of the Accumulation Fund, any parallel Shadow Funds and any related Benefits, such as future Cash Surrender Values, Income Streams and Death Benefits that depend on them.
Fixed Indexed Deferred Annuities (IDA)
With Indexed Annuities, the Policyholder is indirectly invested in the market and is not at risk like they would be with Variable Annuities. However, like, Variable, the performance of their Indexed Funds is dependent the the markets' performances.
Fixed Deferred Annuities (FDA)
In general, Fixed Deferred Annuities are dependent on the performance and efficiency of the Insurance company. However, their investments are very conservative, so DARMA™ projects their returns based on the performance of a passel of typical Insurance company investments.
All Deferred Annuities
No matter which kind of annuity you wish to evaluate, its projected cash flows are discounted based on the policyholder' risk-appetite and that in turn will vary from one economic scenario to the next.
Goals
- Determine a sound Scientific Method and Metric for evaluating a contract
- Provide on-going Management and Monitoring tools
Solution
A new and sound metric to measure the contract’s performance.
This metric is AV-ITM© (“Account Value – In-The-Moneyness”) and it has 2 facets. One , Net AV-ITM©, that compares the current Account Value to future returns net of tax and the other, Gross AV-ITM©, that compares the current Account Value to the future gross returns.
Basically it’s a + or – percentage produced by the app where ‘+’ is ITM and ‘-' is not ITM and its size indicates the magnitude of the ITM. In addition, Other evaluation facets are provided, such as the Present Value of future Cash Flows Net of Taxes and Internal Rates of Return.
IMPORTANT PRINCIPLE
ITM is solely based on future CASH!
The App establishes a theoretical Policyholder Bank Account to process all projected future cash events:
The theoretical Policyholder Bank processes the following Cash Events:
- Premium Deposits
- Free Withdrawals
- Total Surrenders
- Annuity Payments
- Guaranteed Withdrawals
- Death Benefits
- Taxes
- Tax Penalties
- Tax Rebates
If the event is not a cash event resulting from the above and going thru the theoretical Policyholder Bank, then it it does not contribute to the ITM!
Discounting Future Cash Benefits
AV-ITM© is calculated using the time value of money to determine the present value of future cash financial events. This time value of money uses a discount rate that is based on the risk appetite of the Policyholder.
So, if the Policyholder is an aggressive investor, they will get a different AV-ITM© than a conservative investor.
DARMA™ provides AV-ITM© using projected Stochastic (Randomly generated) Economic Scenarios
Each Scenario has its own AV-ITM©
The App employs a generally accepted approach for generating thousands of future Calibrated Randomly Generated Economic Scenarios, that produce a Frequency Distributions of the continuous random variable AV-ITM©
Project up to 10,001 calibrated random scenarios for each variable asset category and provide the user with the results of a range, representing the lowest performing percentile to the highest (0 thru 100).
The resulting Median Scenario (50th Percentile) is recommended as the app’s standard yardstick for the contract’s performance. The metric can be used both as an indicator of the contract’s value and for comparison with other competing contracts’ AV-ITM© that were also processed using this app.
Each Scenario also Produces all future year-end Cash Surrender Values, Death Benefits, Elective Withdrawals and Income streams in the Users targeted range of years
Using an existing available Standardized Classification for the Sub-Accounts Funds Each Sub-Account would have its own level of risk, based on the type of underlying assets.
The App uses the same classification that Insurance Companies use for their new statutory PBR Valuation requirements.
The app presents an initial questionnaire which allows you to model the contract's main features and Benefits followed by a focused hierarchical outline based on those initial answers.
In the App, Current Economic conditions are updated frequently, by InjAnnuity, and future Economic Scenarios are re-generated using these current market condition as a seed for utilization by the User.
Things Change! - User Diligence
DARMA™ produces many sophisticated analytical reports and audits and provides electable options based on the contract’s rules, to strategize the User’s objectives and optimize the contract’s AV-ITM©.
The strength of the app lies in the simplicity of standardizing the results as an AV-ITM© percentage. However, it also provides an easy to understand "Star" evaluation (1 - 10 Stars), excellent reports and sets of data that can be used by the more sophisticated user to “roll their own”.
This is especially useful if you who wish to compare different products for potential purchase.
To summarize; this is an on-going process and a contract should be periodically monitored in light of many factors, such as economic conditions, changes in the policyholder's health and longevity, changes to the contract initiated by the company, short-term guarantees, change of the policyholder’s risk appetite, death of spouse, to name a few.
All of these can significantly change the AV-ITM© evaluation and, if necessary, will require action by the policyholder to re-optimize it.
BE PREPARED TO INVEST SOME TIME IN THIS APP
This will be a challenging but valuable investment of your time.
Effort and patience will be required, but the reward will be a clearer understanding of how your Policy behaves, and what *you* can *do* with it to maximize your returns.
Bad or no decision-making about your contract can result in the loss of significant income, so using this app properly is extremely important for your future retirement.
Bear this in mind as you enter the information, because, unless you have a very simple contract, you will probably have to spend some time and effort to track down all the data that you will need to enter.
In addition to reading and understanding our documentation, you will also have to thoroughly peruse your contract and its related information. You will also need to contact your Insurance Company.
BE PREPARED TO INVEST SEVERAL DAYS OF RESEARCH, ENTERING AND REVISING DATA, CHECKING REPORTS AND AUDITS FROM THIS APP
ALL NECESSARY FOR THE EXTREMELY IMPORTANT GOAL OF UNDERSTANDING AND MONETIZING YOUR DEFERRED ANNUITY INVESTMENT.
DON'T DELAY. GET STARTED TODAY!